ADRIAN MA, HOST:
Eleven-point-seven billion dollars. That's just a rough estimate of how much President Donald Trump's tariffs have cost the world's largest automakers, at least according to their own financial disclosures. But that number could also change because, as we've seen in recent months, many of Trump's tariffs can start and then stop and reverse and start again. But so far, we should say that these big car companies are absorbing most of those losses. But eventually, carmakers are likely to pass those costs on to consumers. Here to help us make sense of it is Jamie Butters, Detroit bureau chief for The Wall Street Journal and former executive editor for Automotive News. Jamie, thanks for being here.
JAMIE BUTTERS: Glad to do it, Adrian.
MA: Let's talk about the number that I just mentioned, $11.7 billion in tariffs. Kind of hard to wrap your mind around, so can you talk about what goes into that?
BUTTERS: Yeah. Well, about half the vehicles that Americans buy are made in the U.S., and about half are imported. About half of those imports come from either Mexico or Canada. And a lot of the parts that go into those North American-made vehicles cross the border multiple times, so you can really rack up some tariff costs there. But he did make this exemption for USMCA-compliant vehicles and parts. If the workers get paid enough and if enough of the content is from North America, taxes aren't quite as high.
And then we've got the other sort of quarter of the vehicles that come from, you know, Japan, Korea or Europe. And those are all 15%, which is really significant. You know, the average vehicle now costs about $50,000, so 15% of that is another $7,500. That's a really significant price hike if it were to all be passed on straight through, which - as you noted, it hasn't been happening so far, but over time, it kind of has to.
MA: It would seem that all these tariffs and the exceptions to them is a lot for carmakers to juggle. What does that uncertainty do for an industry like carmaking?
BUTTERS: It paralyzes it. We're seeing a few investments around the edges trying to accommodate these tariffs. But for the most part, it's hard to bet that these tariffs are going to last beyond Trump's term, or at least there's some concern, right? You don't want to make inefficient investments that aren't going to even pay off until after a Trump presidency, when maybe a new president would go back toward a more free trade sort of economy. But you also have this other factor, which is the - stripping away a lot of the environmental regulations. So U.S. automakers - and we're still seeing GM and Ford try to advance their EV business, but they're not under the same regulatory pressure or regulatory support to be making those investments. And so there's just a concern that the West, and especially the U.S. automakers, will get further and further behind China.
MA: Could price increases that many expect to see in the car industry later this year - could that kind of soften things up for them?
BUTTERS: Yes. It helps the shareholders. It helps the bottom line of the companies. But if you keep raising prices, you are going to price more people out of the market.
MA: According to the Bureau of Labor Statistics, there's around a million people directly employed in auto manufacturing in the U.S. How do the tariffs affect them?
BUTTERS: At least in theory, they benefit workers in the U.S. The UAW - the United Auto Workers Union here, based in Detroit, that - they represent workers at GM, Ford and Stellantis, which owns the former Chrysler, maker of Ram and Jeep. They're in favor of it. It allows the U.S. companies to charge a little more. They have a little less competition from imported vehicles. The consumer's loss is their gain.
MA: On that score, one of the justifications for the auto tariffs is that they will also help bring more manufacturing into the U.S. Is there any evidence of that happening?
BUTTERS: Very little. GM has made a few announcements on the margins - some things they're going to increase. I think, you know, Toyota's going to try to ramp up a little in Georgetown, Kentucky. But I've heard from companies - automakers and suppliers - you know, one of the challenges is even when they want to expand production here, the industrial equipment that they need comes from places like China and Germany, and the taxes on those make it cost-prohibitive to invest in the U.S. And then the other thing you really have to keep in mind - if anybody's investing in new factories now, they are highly automated. You know, they still need humans, but they don't need as many as they used to.
MA: We've been speaking with Jamie Butters, Wall Street Journal's Detroit bureau chief. Jamie, thanks again.
BUTTERS: Any time.
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